Online video not yet a threat to pay TV

Despite the growing amount of video available online, less than 8% of U.S. broadband households are considering canceling their pay-TV services in favor of online video, according to Parks Associates’ All Eyes on Video.

These results from All Eyes on Video are in line with previous Parks Associates studies, which do not show an appreciable likelihood of subscriber churn in favor of online video services. A 2008 study reported 11% of U.S. broadband households were considering canceling pay-TV services, and in an earlier 2009 survey, the number was 10%.

All Eyes on Video found approximately 5.5 million homes would be open to canceling pay TV due in part to the availability of online video. At the same time, one-half of these households are also considering a switch to a new pay-TV provider, indicating the primary threats to companies such as Verizon, Comcast, DirecTV, and Cablevision are still their traditional competitors.

The households likely to switch or cancel their services watch a whopping 10 hours of online video each week, much higher than typical video consumers. They express strong interest in having online access to pay-TV channels (e.g., TV Everywhere), which highlights an opportunity for traditional pay-TV providers to solidify their base through the deployment of such features. Offline video consumption is also higher. Their median number of DVD rentals from the last six months is 18, compared to two rentals among other households.

“The threat of cannibalization is real but misunderstood,” said John Barrett, director, research, Parks Associates. “Nobody is going to rely on online video alone—households likely to cancel their TV services are going to use a mixture of online video, free-to-air broadcasts, and DVDs, including rental services such as Netflix and redbox.”

Barrett also discounted the immediate threat of migration to online video. “Very few households have already made the switch, a sign that the alternative is not yet compelling. Just 0.5% of broadband households (350,000 homes) had pay TV, cancelled it, and now watch five or more hours of online video per week. People who have already made the switch to online video are few in number, and they don’t watch much TV anyway.”

All Eyes on Video surveyed U.S. and Canadian broadband households to gauge current consumer usage and attitudes for advanced video devices and services. Parks Associates will release results and analysis of the Canadian survey in February 2010.

For more information, visit www.parksassociates.com/video or contact sales@parksassociates.com, 972-490-1113.

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